Picture this: your ecommerce startup is finally gaining traction.
Orders are rolling in, but you’re drowning in logistics—warehousing, shipping, and inventory tracking. The problem is, you don’t have the capacity to fill all orders in time.
You’ve heard about partnering with Third-Party Logistics (3PL) or Fourth-Party Logistics (4PL) providers, which can solve your scalability issues.
The question is, which one should you choose?
Statistics show that the U.S. 3PL market is projected to reach $308.16 billion in 2025 — estimated to grow to $337.73 billion by 2030. Meanwhile, the 4PL market is currently on pace to reach just $133.3 billion by 2034.
Of course, the 4PL model is understandably newer than 3PL, but does that fully explain the gap in market size? Or is there a much deeper reason why 3PL is currently dwarfing 4PL?
What Is 3PL? The Time-Tested Logistics Solution
Third-Party Logistics (3PL) is akin to hiring a trusted partner to handle specific components of your logistics.
Think warehousing, inventory management, picking, packing, and shipping.
It’s a modular approach to logistics outsourcing, letting you choose what you need while keeping some aspects of your strategy under your control.
What Makes 3PL Shine
Here’s a quick overview of 3PL’s main benefits:
- Proven Track Record: 3PLs have been streamlining logistics for decades, and it has been a proven model for businesses of any scale — from startups to established, global brands.
- Cost-Effective: With usage-based pricing, you only pay for the exact services you use rather than a flat or quote-based monthly fee.
- Scalable: 3PL solutions integrate seamlessly with existing infrastructures, including popular platforms like Shopify, WooCommerce, and BigCommerce while generally maintaining forward-compatibility with future upgrades.
- User-Friendly: Minimal training is needed to get started with a 3rd party logistics software or service, with intuitive browser-based user interfaces and mobile apps for a variety of logistical tasks.
Best For: Ecommerce startups and small to medium businesses looking for reliable, affordable logistics without the complexity. 3PL is also a solid value proposition for large ecommerce brands rapidly expanding into new markets.
What Is 4PL? The All-In-One Logistics Partner
Unlike 3PL, 4PL takes things up a notch by outsourcing your entire supply chain to another provider.
Think of a 4PL as your logistics quarterback — coordinating everything from strategic planning all the way to reverse logistics and customer service.
What 4PL Brings to the Table
Here’s why you should consider 4PL:
- End-to-End Management: 4PLs offers a completely hands-off approach to logistics, handling forecasting, analytics, and strategic planning in the background while you focus on growth.
- Advanced Tech: Since you’re paying a premium to outsource a 4PL, expect cutting-edge tools like predictive analytics for supply chain optimization.
- Deep Integration: 4PLs become an extension of your business, often with long-term contracts that enable providers to tailor their services to your brand’s exact needs.
What’s the Catch?
4PL sounds like the better deal at first glance, but remember that it may not be a practical choice for some ecommerce brands.
Here are some of the reasons why:
- Higher Costs: Comprehensive services come with a premium price tag, and while 4PL can justify the costs with their scope of service, it doesn’t make them feasible for every ecommerce business.
- Less Control: You delegate strategic decisions, which is a double-edged sword for ecommerce businesses that prefer a bit more control over critical aspects like logistics and customer service.
Best For: Large enterprises with complex, global supply chains needing a fully managed solution so they can focus on expansion. Also feasible for some medium-sized businesses that are seriously bogged down by complex logistical challenges.
Key Differences Between 3PL and 4PL
Still can’t decide which outsourced logistics model is ideal for your business?
To move the needle, here’s a side-by-side comparison in terms of key deciding factors:
Scope: 3PL for specific tasks, 4PL for everything with no exceptions
3PL gives more granular control over which specific tasks you’d like to offset. This is great for cost-effectiveness and flexible deployment, but you may run into issues integrating outsourced tasks into your existing workflows.
4PL, on the other hand, will cover everything in the entire supply chain.
You don’t have to worry about compatibility or conflicts with existing systems — because 4PL is the entire system. Of course, 4PL vendors will adjust the scope of their services to your needs, but that doesn’t make it any cheaper than 3PL, which leads to the next point…
Cost: 3PL can lower costs, while 4PL also does under certain conditions
Naturally, 3PL tends to cost less because it follows pay-per-use models.
While 4PL tends to be more expensive, it can help big businesses with massive supply chain infrastructures reduce costs through more streamlined integrations and process optimizations. The cost savings, however, will only be realized by businesses with large enough volumes where these optimizations can make a difference.
Control: 3PL lets you stay in the driver’s seat, while 4PL requires you to hand over the keys
With 3PL, you maintain control over which tasks to outsource. In fact, the whole point of 3PL software is to give you a self-service, DIY dashboard where you can manage everything.
The script is totally flipped with 4PL services, which only technically requires your permission to make all strategic decisions on your behalf.
Scalability: Both are scalable, but 4PL is for larger businesses
Scalability works differently between 3PL and 4PL.
With 3PL, scalability is all about flexibility and the brand’s autonomy to choose additional services or pay for more capacity.
But with 4PL, scalability is comprehensive and will be implemented and managed by the provider. The brand only needs to greenlight the proposed adjustments as well as provide its input on strategic goals and Key Performance Indicators (KPIs).
How to Choose the Right Option for Your Business
Before we wrap up this guide, here’s a quick checklist to consider when choosing between 3PL and 4PL:
- Budget: Can you justify 4PL’s higher costs, or is 3PL’s pay-per-use model more your speed?
- Scale: Are you a startup needing targeted solutions (3PL) or a large business requiring end-to-end management (4PL)?
- Compatibility: Ensure the provider integrates with your ecommerce platform (e.g., Shopify, BigCommerce).
- Transparency: Look for clear pricing and policies.
- Test It Out: Use free demos to evaluate user-friendliness and scalability.
What’s Next?
Choosing the right logistics partner is a game-changer for your ecommerce success.
With 3PL’s time-tested reliability and cost-effectiveness, you can streamline operations and focus on growing your brand. Larger ecommerce businesses, however, can unlock greater efficiency and even cost savings with a 4PL that can understand their specific needs in terms of logistics and supply chain infrastructure.
Hopefully, the post above helped you decide the best model for your business. Cheers!